<PAGE> 1
U. S. Securities and Exchange Commission
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT For the transition period from to
___ ___
Commission file number 0-12113
TIGERA GROUP, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 94-2691724
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
667 MADISON AVENUE, 25TH FLOOR, NEW YORK, NY 10021
(Address of principal executive offices)
212-644-8880
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: Common Stock, $.01 par value,
outstanding as of May 10, 1996: 22,236,301 shares
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [ X ]
<PAGE> 2
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements 3
Condensed Consolidated Balance Sheet as of March 31, 1996 4
Condensed Consolidated Statements of Operations 5
for the Three Months Ended March 31, 1996 and 1995
Condensed Consolidated Statements of Cash Flows 6
for the Three Months Ended March 31, 1996 and 1995
Notes to Condensed Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of 9-10
Results of Operations and Financial Condition
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURE 12
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PART I. FINANCIAL INFORMATION
Item 1. Tigera Group, Inc. -- Condensed Consolidated Financial
Statements (Unaudited)
The Condensed Consolidated Financial Statements included
herein have been prepared by Tigera Group, Inc. (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes the disclosures which are made are adequate to make the
information presented not misleading. Further, the Condensed Consolidated
Financial Statements have been prepared in accordance with generally accepted
accounting principles for interim financial information, the instructions to
Form 10-QSB and Regulation S-B (including Item 310(b) thereof) and reflect, in
the opinion of management, all adjustments necessary to present fairly the
financial position and results of operations as of and for the periods
indicated.
It is suggested that these Condensed Consolidated
Financial Statements be read in conjunction with the Consolidated Financial
Statements and the Notes thereto for the year ended December 31, 1995, included
in the Tigera Group, Inc. Form 10-KSB Annual Report to the Securities and
Exchange Commission.
The results of operations for the three months ended March
31, 1996 are not necessarily indicative of results to be expected for the entire
year ending December 31, 1996.
See Item 2 - "Management's Discussion and Analysis of
Results of Operations and Financial Condition."
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TIGERA GROUP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
MARCH 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and Cash Equivalents $ 161,000
United States Treasury Bills 11,141,000
Other Assets, including restricted cash of $1,000,000 1,128,000
------------
Total Assets $ 12,430,000
============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities $ 159,000
------------
Total Liabilities 159,000
------------
Commitments & Contingencies
Stockholders' Equity:
Preferred Stock - par value $.01 per share;
authorized 10,000,000 shares, none issued
Series B Common Stock - par value $.01 per share; authorized 750,000
shares, none issued
Common Stock - par value $.01 per share; authorized 40,000,000 shares,
outstanding 21,911,301 shares, net of 826,405 shares
held in treasury 219,000
Additional Paid-in Capital 109,035,000
Accumulated Deficit (96,983,000)
------------
Total Stockholders' Equity 12,271,000
------------
Total Liabilities and Stockholders' Equity $ 12,430,000
============
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE> 5
TIGERA GROUP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Operating Expenses:
General and Administrative $ (245,000) $ (217,000)
----------- -----------
Operating Loss (245,000) (217,000)
Other Income:
Interest Income 162,000 171,000
----------- -----------
Net Loss $ (83,000) $ (46,000)
=========== ===========
Net Loss Per Share $ --- $ ---
========== ==========
Weighted Average Number of Common
Shares Outstanding 21,682,134 21,286,301
========== ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE> 6
TIGERA GROUP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net Loss $ (83,000) $ (46,000)
Adjustments to Reconcile Net Loss to Net
Cash Used in Operating Activities:
Change in Assets and Liabilities:
(Increase)/Decrease in Other Assets (5,000) 82,000
Increase/(Decrease) in Accounts Payable and
Accrued Liabilities 55,000 (69,000)
----------- ----------
Net Cash Used in Operating Activities (33,000) (33,000)
----------- ----------
Cash Flows from Investing Activities:
Purchases of United States Treasury Bills (1,661,000) (3,272,000)
Sales of United States Treasury Bills 1,380,000 3,300,000
----------- ----------
Net Cash Provided by/(Used in) Investing Activities (281,000) 28,000
----------- ----------
Cash Flows from Financing Activities:
Exercise of Stock Options 299,000 ---
----------- ----------
Net Cash Provided by Financing Activities 299,000 ---
----------- ----------
Net Decrease in Cash and Cash Equivalents (15,000) (5,000)
Cash and Cash Equivalents at Beginning of Period 176,000 214,000
----------- ----------
Cash and Cash Equivalents at End of Period $ 161,000 $ 209,000
=========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE> 7
TIGERA GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1996
Note 1 - Condensed Consolidated Financial Statements:
The Condensed Consolidated Financial Statements included herein
have been prepared by Tigera Group, Inc. (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes the disclosures which are made are adequate to make the
information presented not misleading. Further, the Condensed Consolidated
Financial Statements have been prepared in accordance with generally accepted
accounting principles for interim financial information, the instructions to
Form 10-QSB and Regulation S-B (including Item 310(b) thereof) and reflect, in
the opinion of management, all adjustments necessary to present fairly the
financial position and results of operations as of and for the periods
indicated.
It is suggested that these Condensed Consolidated Financial
Statements be read in conjunction with the Consolidated Financial Statements and
the Notes thereto for the year ended December 31, 1995, included in the Tigera
Group, Inc. Form 10-KSB Annual Report to the Securities and Exchange Commission.
Note 2 - Net Loss per Share:
Net loss per share is based on the weighted average number of
common shares outstanding during each period. Common share equivalents (common
stock options and warrants) have not been included in the calculation because
the effect would be anti-dilutive.
Note 3 - Income Taxes:
The Company files a consolidated federal income tax return. The
Company recognizes certain expenses for income tax purposes in years different
from those in which they are provided for in financial reporting.
As of December 31, 1995, the Company has net operating loss
carryforwards of approximately $88,000,000, which are available to offset future
taxable income expiring from 1996 through 2010. The Company also has available
investment and research and development credits of approximately $2,000,000
expiring in 1996 through 2000. The ability of the Company to utilize these
carryforwards in future years may be limited, or even eliminated.
Specifically, the Internal Revenue Code of 1986, as amended (the
"Code"), imposes substantial limitations under certain circumstances on the use
of net operating loss carryforwards upon the occurrence of an "ownership change"
(as defined in Section 382 of the Code). An "ownership change" can result from
issuances of equity securities by the Company, purchases of the Company's
securities by the Company, purchases of the Company's securities in the
secondary market by existing or new stockholders or a combination of the
foregoing. The Company's desire to issue new equity securities could be limited
in order to prevent such an "ownership change" from occurring. Alternatively,
certain shareholders could occasion an ownership change if they substantially
increased their ownership of the Company's Common Stock. The Company has
determined that an "ownership change" has not occurred through March 31, 1996,
based on the information available to it.
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As of December 31, 1995, the deferred tax assets related to the
net operating loss carryforwards and investment and research and development
credit carryforwards totaling approximately $36,000,000 have been fully offset
by valuation allowances, since the utilization of such amounts is uncertain.
Note 4 - Stockholders' Equity:
During the three months ended March 31, 1996, options to purchase
625,000 shares of common stock at $.375 to $.625 per share were exercised. Also,
on March 8, 1996, a warrant to purchase 250,000 shares of common stock at an
exercise price of $2.03 per share (fair market value on date of grant) was
granted. The warrant becomes exercisable in equal yearly increments from the
date of grant to March 8, 1998, and will expire on March 8, 2006.
Note 5 - Agreement in Principle:
On March 7, 1996, the Company announced that it has reached an
agreement in principle to acquire a controlling interest in a privately held
manufacturing and distribution company. The company, which was not identified,
reported sales in the $75,000,000-$100,000,000 range in 1995. The acquisition is
subject to the conclusion of a mutually acceptable definitive acquisition
agreement, as well as numerous other conditions.
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<PAGE> 9
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
March 31, 1996
The principal activity of Tigera Group, Inc. (the
"Company" or the "Registrant"), formerly named Fortune Systems Corporation,
consists of seeking and evaluating candidates for acquisition. The Company has
established strategic and financial criteria and is engaged in the
identification of and has had discussions with a number of candidates. The major
considerations are that the Company acquire a controlling equity position in an
established entity with growth potential. Additionally, the candidate for
acquisition should have an experienced management team, a history of
profitability, a competitive position in its industry and a solid plan for
future growth from a combination of internal expansion and external
acquisitions. Although helpful to the acquisition process, the Company's
criteria are not intended to be definitive, but rather reflect priorities and
objectives. The Company identifies potential acquisition candidates through
communications with investment banking, broker, legal and accounting firms and
other sources. The Company competes for acquisitions against domestic and
international companies, financial groups and other entities, many of which may
have greater financial resources and borrowing capacity than the Company.
On March 7, 1996, the Company announced that it has
reached an agreement in principle to acquire a controlling interest in a
privately held manufacturing and distribution company. The company, which was
not identified, reported sales in the $75,000,000-$100,000,000 range in 1995.
The acquisition is subject to the conclusion of a mutually acceptable definitive
acquisition agreement, as well as numerous other conditions.
General and administrative expenses, including expenses
relating to the Company's search for acquisition candidates, day-to-day
operational costs and professional fees, increased to $245,000 for the three
months ended March 31, 1996, from $217,000 for the three months ended March 31,
1995. The increase was due to payments for salaries, office space and related
costs in connection with the Company's search for an acquisition.
Interest income decreased to $162,000 for the three months
ended March 31, 1996, from $171,000 for the three months ended March 31, 1995.
The decrease is attributable to a decrease in interest rates on the Company's
United States Treasury Bills.
If the Company is unable to acquire control of an
operating business or businesses, it may be required to register as an
investment company under the Investment Company Act of 1940, as amended ("Act").
The Company is unable to predict what effect registration under such Act would
have, but it believes that its ability to pursue its current business plan could
be adversely affected as a result. The most significant difference with respect
to financial statement presentation and disclosure requirements for companies
registered under the Act would require the investments held by the Company to be
adjusted to market value at the balance sheet date. Given the nature of the
investments held by the Company, the Company believes that the financial
statement reporting and disclosure requirements would not be materially
different from those presented herein.
As of December 31, 1995, the Company has net operating
loss carryforwards of approximately $88,000,000, which are available to offset
future taxable income expiring from 1996 through 2010. The Company also has
available investment and research and development credits of approximately
$2,000,000 expiring in 1996 through 2000. The ability of the Company to utilize
these carryforwards in future years may be limited, or even eliminated.
Specifically, the Internal Revenue Code of 1986, as amended (the "Code"),
imposes substantial limitations under certain circumstances on the use of net
operating loss carryforwards upon the occurrence of an "ownership change" (as
defined in Section 382 of the Code). An "ownership change" can result from
issuances of equity securities by the Company, purchases of the Company's
securities by the Company, purchases of the Company's securities in the
secondary market by existing or new stockholders or a combination of the
foregoing. The Company's desire to issue new equity securities could be limited
in order to prevent such an
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<PAGE> 10
"ownership change" from occurring. Alternatively, certain shareholders could
occasion an ownership change if they substantially increased their ownership of
the Company's Common Stock. The Company has determined that an "ownership
change" has not occurred through March 31, 1996, based on the information
available to it.
Liquidity and Capital Resources
Cash and cash equivalent balances decreased to $161,000 as
of March 31, 1996, compared with $176,000 as of December 31, 1995. The decrease
is primarily attributable to the payment of general and administrative expenses
in excess of interest income and the purchase of United States Treasury Bills.
As of March 31, 1996, the Company's principal source of
funds consisted of $161,000 in cash and cash equivalents, and $11,141,000 of
United States Treasury Bills. Near-term capital requirements for operating
expenses and payment of liabilities are expected to be financed through cash
flow from interest income and existing cash balances. The Company may finance
future acquisitions from a number of sources, including but not limited to
existing cash balances, bank debt, the use of promissory notes and the issuance
of additional debt or, to the extent possible, equity securities.
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<PAGE> 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Note 6 in the Notes to Consolidated
Financial Statements for the year ended December 31, 1995, included in the
Tigera Group, Inc. Form 10-KSB Annual Report to the Securities and Exchange
Commission.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None.
(b) Reports on Form 8-K: None.
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<PAGE> 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TIGERA GROUP, INC.
(Registrant)
By: /s/ Robert E. Kelly
----------------------------
Robert E. Kelly
Senior Vice President,
Chief Financial Officer and
Principal Accounting Officer
Dated: May 10, 1996
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<PAGE> 13
EXHIBIT INDEX
27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 161,000
<SECURITIES> 11,141,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,430,000
<CURRENT-LIABILITIES> 159,000
<BONDS> 0
0
0
<COMMON> 219,000
<OTHER-SE> 12,052,000
<TOTAL-LIABILITY-AND-EQUITY> 12,430,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 245,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (83,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (83,000)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
